There is a little confusion over what “100% financing” actually means. Client and vendors sometimes think it’s financing without any upfront costs to the customer. If this were true then it would be called “no upfront cost financing” but this is not the case. 100% financing actually means that it includes 100% of all the project and equipment costs; things like labor, consulting, shipping and handling and legal fees can be included into the finance package so that you don’t have to pay for any of these fees separately.
Financing which covers all of your separate expenses is a huge benefit, otherwise you would have to come out-of-pocket for the excluded items, which is usually one of the reasons you decided to use financing in the first place. The reason 100% financing holds a specific distinction in lending is that most commercial lenders require a substantial deposit to get into a loan; something like 20% or 25% or more is very common. Or they simply won’t cover the consulting fees or legal fees as these are “soft” costs and can’t be recovered in case of default. You will find most independent finance companies working with private investor money do cover the soft costs which gives them the edge in the market.
So what type of fees can be required with 100% financing? Normally a one month or two month payment in advance is required but this isn’t a “fee” since it pays down your lease and instead of 60 months you end up with 58 months due. The actual fees required are normally only documentation and sometimes site inspection fees, nothing else. Once you’ve agreed to the terms of the finance, you pay the documentation fees in order for the lender to provide you with a legal agreement; this fee is normally in the $300 range. Some projects require an inspector to actually visit your site to confirm the project is complete and working properly and this is also in the $350 range so neither fee is exorbitant.
We have seen lending contracts which are 100% financing with no upfront costs but these are normally reserved for municipalities and public companies working on large energy projects. Paying a small documentation fee and one month in advance doesn’t make your lease not 100% financed and when you consider the alternative of going to a commercial lender and paying 20% down then it becomes an easier decision to make.